Newsletters
The Central Bank of the Republic of Türkiye (CBRT) raised its 2026 year-end inflation forecast to 28% from 26% on Thursday in its third Inflation Report of the year, citing elevated energy and commodity prices.
CBRT Governor Fatih Karahan acknowledged that disinflation had lost momentum in recent months but maintained that the process would regain pace as the impact of supply shocks fades. "We believe disinflation will accelerate again with a tight policy stance, and we will maintain our tight policy stance in line with our interim targets," Karahan said.
The central bank left its year-end inflation forecasts for 2027 and 2028 unchanged at 15% and 9%, respectively. It continues to target 5% inflation over the medium term. Türkiye’s annual consumer inflation stood at 31.8% in July, while monthly inflation accelerated to 1.78%, driven in part by renewed price pressures.
In May, the CBRT had raised its 2026 year-end inflation forecast by 8 percentage points to 26%, again citing higher energy and food prices following the outbreak of the Iran war.
In today’s presentation, the CBRT attributed the 2-percentage-point upward revision for 2026 largely to higher diesel, natural gas and non-energy commodity prices. Higher food-price and administered-price assumptions also contributed to the revision.
Karahan indicated that the bank lowered its 2026 oil-price assumption to $87.8 from $89.4, while raising its 2027 forecast to $76.4 from $75.4. It also raised its 2026 import-price assumption to 6.9% from 6.3%, but lowered the 2027 figure to -0.4% from -0.2%.
The governor also flagged diesel refinery margins as an additional source behind higher fuel prices, while natural gas and electricity recorded the largest price increases during the war period.
Geopolitical developments have also disrupted shipping through the Strait of Hormuz. Traffic initially picked up after the June agreement between the U.S. and Iran but later fell back toward a near standstill, pushing energy prices higher, Karahan recalled.
Karahan reiterated that the central bank will keep monetary conditions tight as it works to bring inflation down. The CBRT cut its policy rate by 100 basis points to 37% in January and has kept it unchanged since then as geopolitical risks intensified.
The bank has also stopped one-week repo auctions, instead meeting liquidity needs through overnight funding at the upper band and keeping money-market rates at 40%, above the 37% policy rate.
"We maintain our firm and prudent stance," Karahan said, adding that the bank was shaping monetary policy with a focus on both the short and medium term. The CBRT continues to use macroprudential measures targeting Turkish lira deposits, credit growth and liquidity management, he added.
However, Karahan also said a return to one-week repo auctions could come onto the agenda in the coming period, depending on market and liquidity conditions.
Following the announcement, Türkiye’s Borsa Istanbul pared all of its intraday gains, which had reached 0.7% led by banking stocks, as investors took the central bank’s comments as a sign that its tight monetary policy stance would remain in place.
Responding to reporters’ questions about the upcoming Medium-Term Program update, Karahan confirmed that the 2027 and subsequent-year targets are set to be reviewed as part of the process, opening the door to revisions of the current targets.
Set as preferred source
Set as preferred source
1 min read
1 min read
